30 March 2017

Quarter of a million Royal London members see pension charges effectively slashed by more than a third in 2016

4 min read

Helen Morrissey, Personal Finance Specialist
Helen Morrissey

Corporate PR Specialist – Long Term Savings


In a ground-breaking deal for pension savers Royal London, the UK’s largest life, pensions and investment mutual, today announces that it is sharing £114 million profit from 2016 with more than one million of its members. 

This brings the total amount distributed to Royal London customers since 2007 to £650 million. More than £37 million of this year’s £114 million ProfitShare will benefit customers who saved into or took some retirement income from a pension with Royal London last year. Members will receive payments ranging from thousands of pounds for those with larger pots who have been saving for years, to smaller amounts for those just starting to save. These payments will effectively wipe more than a third off the charges for a quarter of a million Royal London pension savers.

Last year Royal London increased the pool of customers who share in its profits to include all unit-linked pension and drawdown members. This means that anyone automatically enrolled into a Royal London workplace pension scheme or taking an income from an eligible Royal London pension will get a slice of the mutual’s profits to give their pension savings a boost. More than 700,000 additional members are set to benefit in this way.

Depending on how well the business performs each year Royal London will aim to give its pension customers a share of its profits alongside its with-profits customers who have been benefiting from a share of the profits since 2007. Our aim is to award a ProfitShare of between 0.15% – 0.25% of the unit-linked value of the qualifying customer’s plan. The extra money for pension savers will be invested to help their retirement savings grow further.

A customer who joined their workplace pension scheme last year aged 30, and contributes £200 per month retiring at age 65, could benefit from a boost of £4,584 or 4% - taking their pot from £116,324 to £120,908 - assuming ProfitShare of 0.20% is added to their plan every year.

If this customer then starts to take an income of £500 per month from their pension they could have this level of income until age 88. With ProfitShare at 0.2% each year they could have this level of income until age 90 giving them an extra two years' worth of retirement income.

Phil Loney, Chief Executive of Royal London, commented:

As a member-owned business, our customers come first and ProfitShare is a powerful demonstration of the extra value we can give to our customers. It offers a tangible benefit and is real proof that we have their interests at the heart of our business. We are delighted that more than one million Royal London members will this year be sharing £114 million in ProfitShare payments. In simple terms, when Royal London does well so do its customers.

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For further information please contact:

Helen Morrissey, Corporate PR Specialist – Long Term Savings

Notes to Editors:

  • In 2007 Royal London introduced profit sharing arrangements for its with-profits customers. Up to the end of 2015 the savings of existing with-profits customers have been boosted by distributing profits of £536m in total.
  • From the start of 2016 all new Royal London Workplace, Individual Pension and Drawdown policies will share in our profits, plus all existing unit-linked Royal London Workplace, Personal Pension and Drawdown policies, taken out since 1 July 2001. This will include all those customers who have been automatically enrolled into a workplace pension. This year over 700,000 pension customers will benefit and over the next five years an estimated 300,000 new pensions customers will be eligible.
  • Distributing £114m to with-profits and unit-linked customers this year takes the total amount of profit shared with eligible customers since 2007 to £650m.
  • Royal London will review its financial strength and performance each year to decide whether a ProfitShare may be awarded. Customers will then qualify to receive any unit-linked ProfitShare allocations awarded, in April the following year, provided their plan is still in force. The yearly grant of ProfitShare is at the discretion of the Royal London Board and is not guaranteed.
  • Based on previous experience and future business plans our aim is to award a ProfitShare of between 0.15% – 0.25% of the unit-linked value of the qualifying customer’s pension plan. Pension customers typically pay charges of between 0.3% and 1.0% for UK pensions depending on the type of product and the size of pension pot. The amount will be added as a separate ProfitShare account within customers’ plans, invested in the same investment choices as the main plan, and customers benefit from any investment growth in the value of these units. Over time, the separate ProfitShare amounts awarded are expected to boost customers’ retirement savings and will be available for customers to access, along with the rest of their retirement benefits, any time after age 55. Once a ProfitShare amount has been allocated to a qualifying customer’s plan it will not be taken away. The ProfitShare does not count as a contribution and so does not reduce the level of tax free contributions that customers can make to their pension plan each year.